Illinois is one of just eight states with a flat income tax — which means no matter how much residents make, they pay the same percent of their income in taxes.
Gov. Bruce Rauner wants to keep the state’s flat income tax, which is currently 4.95 percent. But Democratic gubernatorial candidate JB Pritzker wants to move to a graduated tax system where residents with high incomes pay a higher rate than middle-class and low-income residents.
Three weeks ahead of Election Day, David Merriman, director of the Fiscal Futures project at the University of Illinois at Chicago, joined Morning Shift to explain the state’s current income tax system and what a graduated tax rate would mean for Illinois residents.
Why do we have a flat tax?
David Merriman: It was put into the Illinois constitution when it was rewritten in 1970 that we couldn’t have a graduated rate tax. I think there was some hostility to the idea that a minority of taxpayers would have to pay the large burden of government spending at the time.
Does the governor have the power to change the tax structure?
Merriman: Actually, the governor is not involved in the process at all. The process would involve first the state legislature — both the House of Representatives and the Senate — to vote to put it on the ballot. Then, you need a supermajority to do a constitutional amendment. And then, 60 percent of the people that vote on that question would have to vote for a graduated rate tax. It would certainly take at least a couple years to even make that legal. And then, of course, you’d have to negotiate what the rate would be.
How much money could the state bring in with a graduated income tax?
Merriman: How much money it could bring in depends on what the rate structure is. One thing people should be aware of is that a small share of Illinois taxpayers have a large share of the state’s income. The top 5 percent or so of income tax returns have about 40 percent of the income. So if you were to target [that group’s] rate with a relatively small increase from 5 to 6 or 7 percent, that would be a lot of income that you’re targeting and bringing in revenue from. How high you want that rate to go is a question and what you do with lower income taxpayers is also a question.
This interview has been edited for brevity and clarity. Click the “play” button to listen to the entire interview, which was adapted for the web by Arionne Nettles.